Question

This project requires some Googling and independent research. It should take you a total of 3-4 hours to properly research, prepare, and edit this assignment. Each answer requires at least one citation, but different answers can share citations. Citations are optional for questions 6-8. All citations must be properly referenced and attached as a PDF document. If you are unsure what I mean by citations and references, please ask. The maximum grade without citations and references will be 3/8. To get the full 8, the insights must be original, insightful, and publishable in CPA Journal. Ideal references include prominent newspapers, professional and academic journals, and government publications. Good, adequate work that is properly cited, referenced (and PDFs attached) will receive 7 out of 8 points.

1. What is the top marginal corporate income tax rate in the U.S.? Please cite your source, reference it, and attach a PDF printout.

2. What was the top marginal corporate income tax rate before TCJA of 2017?

3. Many Democrats believe that the corporate tax rate should be higher. What is their argument?

4. What is an argument in favor of a low corporate tax rate?

5. What is the highest marginal individual income tax rate in the U.S.?

6. Why are corporate taxes lower than individual income taxes?

7. Present an argument for corporate taxes to be higher or equal to the highest individual income tax rates.

8. Present an argument for corporate taxes to be lower than the average individual income tax rate?

References (minimum of 3)

Answer 1

(1)The United States taxes the profits of US resident C corporations (named after the relevant sub-chapter of the Internal Revenue Code) at 21 percent.Taxable corporate profits are equal to a corporation’s receipts less allowable deductions—including the cost of goods sold, wages and other employee compensation expenses, interest, non-federal taxes, depreciation, and advertising. US-based corporations owned by foreign multinational companies generally face the same US corporate tax rules on their profits from US business activities, as do US-owned corporations.

[https://www.taxpolicycenter.org/sites/default/files/briefing-book/how_does_the_corporate_income_tax_work.pdf]

(2)he Tax Cuts and Jobs Act (TCJA) reduced the top corporate income tax rate from 35 percent to 21 percent and eliminated the graduated corporate rate schedule. The new law also repealed the corporate alternative minimum tax. The TGCA made fundamental changes to the treatment of multinational corporations and their foreign source income. Profits earned abroad by US resident multinationals are now exempt (a “territorial” system). In addition, it created two new minimum taxes—the tax on Global Intangible Low-Taxed Income (GILTI) and the Base Erosion and Anti-abuse tax (BEAT). Another provision of the TCJA provides a new deduction for certain foreign-derived intangible income (FDII).

[https://www.taxpolicycenter.org/sites/default/files/briefing-book/how_does_the_corporate_income_tax_work.pdf]

(3)

(4)Argument in favor of a low corporate tax rate

• Lower Business Tax Rates Raise Worker Pay.
• United States needed a corporate tax rate that was closer to the norm in order to reduce the incentive for firms to shift profits or physical capital and jobs to lower-tax jurisdictions.
• The reduction in the corporate tax rate drives these long-run economic benefits by significantly lowering the cost of capital.
• Once the highest rate in the OECD, the United States corporate income tax rate is now closer to the middle of the pack. This will encourage other countries to move away from high taxes on capital toward more competitive corporate income tax rates.
• Raising the corporate income tax rate would dismantle the most significant pro-growth provision in the Tax Cuts and Jobs Act, and carry significant economic consequences.

Given the positive economic effects of a lower corporate tax rate, lawmakers should avoid viewing the corporate income tax as a potential source of raising additional revenue. Raising the corporate tax rate would walk back one of the most significant pro-growth provisions in the Tax Cuts and Jobs Act, TAX FOUNDATION | 8 and reduce the global competitiveness of the United States. Economic evidence indicates that it is workers who bear the final burden of the corporate income tax, and that corporate income taxes are the most harmful for economic growth—raising this tax rate is not advisable. The new, permanently lowered corporate tax rate makes the United States a more attractive place for companies to locate investments and will discourage profit shifting to low-tax jurisdictions. The lower rate incentives new investments that will increase productivity, and lead to higher levels of output, employment, and income in the long run. By permanently lowering the corporate tax rate in the Tax Cuts and Jobs Act, lawmakers succeeded in making the United States a more globally competitive location for new investment, jobs, innovation, and growth.

[https://files.taxfoundation.org/20180813165516/The-Benefits-of-Cutting-the-Corporate-Income-Tax_FF606.pdf]

(5)There are seven tax brackets for most ordinary income: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. The U.S. has a progressive tax system, which means that as you move up the pay scale, you also move up the tax scale.Individuals who make the lowest amount of income are placed into the lowest marginal tax rate bracket, while higher earning individuals are placed into higher marginal rate tax brackets. However, the marginal tax bracket in which an individual falls does not determine how the entire income is taxed. Instead, income taxes are assessed on a progressive level. Each bracket has a range of income values that are taxed at a particular rate.

[https://fas.org/sgp/crs/misc/R45145.pdf]

(6)In many OECD countries, statutory corporate tax rates are lower than personal income tax rates. This tax rate difference is often particularly large for small firms. The present paper argues that a reduction of the corporate tax rate below the personal tax rate is an optimal tax policy if there are problems of asymmetric information between investors and firms in the capital market. The reduction of the corporate tax rate below the personal tax rate encourages equity financing and thus mitigates the excessive use of debt financing induced by asymmetric information. Our main theoretical result stands in marked contrast to the traditional view of corporate taxation and corporate finance theory, according to which there is a tax disadvantage to equity financing. More recent empirical evidence on this issue, however, is in line with our result.

[file:///F:/My%20Downloads/00-17.pdf]

(7)